Commonwealth Bank of Australia (CBA) has settled a long-running case with the Australian Taxation Office (ATO) over a multimillion-dollar research and development (R&D) tax incentive claim.

The R&D incentive was meant to boost eligible R&D projects in Australia by offering a tax rebate on such activities.

The programme is jointly administered by the ATO and Department of Industry, Innovation and Science.

CBA had applied for the rebate in connection with its core platform revamp covering the 2012-13 financial year.

However, the project failed to qualify under the R&D incentive scheme.

ATO deputy commissioner Rebecca Saint said: “The ATO is committed to supporting innovation of Australian businesses, however, activities must meet strict legal criteria to qualify for the R&D tax incentive.

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Just because a project is large, expensive or risky does not mean it necessarily qualifies as R&D for the purposes of the tax incentive.”

CBA did not divulge the terms of the settlement.

However, it said that the decision will not affect its current or future year earnings.

Commenting on the issue, CBA said: “Under the agreement terms, CBA has agreed to withdraw from all current proceedings with the ATO and Innovation and Science Australia (ISA) before the Administrative Appeals Tribunal (AAT) in respect of the eligibility of R&D claims that were made for the years ended 30 June 2012 and 30 June 2013 relating to the CBA core banking modernisation project that involved digital transformation and software development.”

At the same tine, the bank pledged to cooperate with the ATO and ISA for registration of R&D activities going forward.